Company Vans
Light commercial vehicle drivers employed by businesses or directors of a business have to pay what the tax man reckons unlimited private use of a van is worth (known as the scale charge). From 6 April 2007 the scale charge has risen from £500 to a whopping £3,000.
For a basic rate tax payer this will increase the annual tax burden from £110 to £660.The devil however is in the detail. There has also been a change in the way that Private Mileage has been defined. No private mileage = No tax, One private mile = Full tax. However if a driver has to take a van home as part of their job, i.e. on-call service engineer then this is not considered private usage but taking the family for a weekend away is. This stipulation does not apply to self employed owner drivers.
What is still not clear is where the burden of proof lies around the private usage of the van. Does the company have to manage and report or is it up to the individuals? In each case it is not clear how you can prove that there is no private usage. To be as sure as possible of avoiding the tax man’s wrath your employer must be able to show to the Inland Revenue that you don't have to pay tax. This means drivers could be asked to:
- keep mileage records
- sign an agreement about the van use
- have use of the van put into a contract of employment.
It is worth noting that if you do make private journeys other than commuting in the van you will be charged tax for this. However if this private travel is insignificant (like taking an old mattress or other rubbish to the tip once or twice a year) - then you will still not have to pay any tax.
The Pick-up Loophole
The Inland Revenue are, unfortunately, no fools. They know that scores of drivers who pay Company Car Tax have been swapping their cars for double cab pick-ups. Why? Because a Double Cab is one of the only luxury (many are fitted with plush Leather/Sat Nav/Climate Controlled/Automatic Transmission/etc.) 5 seat vehicles classed as a commercial vehicle. And that means a lower tax bill compared to a regular car.
As we said above, from April 6th 2007 if you currently pay Benefit in Kind Tax for the perk of your Company “giving” you a pick-up, then that tax goes up 600%. Frightening though this increase is it can still be cheaper than running a car. Pick-ups are still classed as commercial vehicles, therefore you can reclaim 100% of the VAT.
The following example should put the increases in some perspective: Say you are driving a Nissan Navara supplied by Low Cost Vans. Pre April 2007 this would have set you back tax of £110 (or £200 if you are a 40% tax payer), post April 2007 your tax bill will be £660 (or £1200 if you are a 40% tax payer) A Ford Mondeo TDCi will be taxed at £831 @ 22% or £1512 for higher earners. A BMW 325i SE will be £1591 @ 22% or £2894 @ 40%.
Tax on Fuel
From 20/07/08, there is a further tax charge if free or subsidised fuel is provided for private use in a company van.
The amount is reduced if you do not have the van for the whole tax year, if someone else also uses it for private travel, or if you pay something for using it privately.
Further information about tax on private fuel for company vans and taxation matters in general is available at the Revenue and Customs Web Site.
Need advice on tax rules for vans and light commercial vehicles?
Call Low Cost Vans on 0845 22 44 125
or complete our online enquiry form